Strategic Thinking For IT- Part1

• IACT 901• Modules 3 and 4• University of Wollongong

• Penney McFarlane

Strategy Defined

•Purpose of strategy is to provide direction, concentration of effort (focus) constancy of purpose (perseverance) & flexibility (adaptability)

•At a pragmatic level strategy can be viewed simply as finding a short way (the shorter the better) of 'brute force' to accomplish its end

– It should be comprehended as the movement from a current position to a more desirable future position, but with economies of time, effort, cost or resource utilisation

– The purpose is the building, compounding and sustaining of advantage

Therefore It MUST Focus on

– Building new advantages that increase customer satisfaction & create distance from competitors

– Compressing or eliminating the advantage of competitors

Five Generic Categories of Advantage1. Cost advantage - being able to

provide products/services more cheaply

2.Value-added advantage - advantage creates a product/service that

•Offers some highly desirable feature/functionality

• 3.Focus advantage - advantage more tightly meets the explicit needs of a particular customer

4. Speed advantage - permits business to create/deliver products & customer service needs quicker than others

5. Manouverability advantage - advantage permits business to adapt to changing requirements more quickly than othersPermits business to constantly refresh

other types of advantage - One advantage competitors can't take from

you

•Business wins by being cheaper, more unique, more focussed, faster & more adaptable than competitors

Questions in Small Groups

• Q. What examples can you provide of where IT was/may be used to provide advantage under each of the 5 categories?

• Q. What strategies might a govt dept or service in a non-competitive environment employ? Would they fit into the categories above?

More Questions

• According to boar (1997) if an action does not lead to development of advantage it is of no strategic interest

• Q. Do you think this would always be the case? Give an example to support your position.

Still More Questions

• Administration of advantage is the building of a set of sustainable competitive advantages (SCA's) for the business.

• Q. Do they always have to be sustainable? How likely is this with IT? Give examples of cases where IT does/does not provide long-term advantage.

SCA (Sustainable Competitive Advantage]• An SCA is a

resource, capability, asset or process that provides a business with a distinct attraction to its customers & a unique advantage over its competitors.

SCAs Have Seven Attributes• SCA viable in terms of time & cost

it would take a competitor to imitate it

• Degree of relative advantage - ( does the competition feel it is worth the effort?)

• Compatibility - how harmonious is the advantage with the rest of the competitors product plan?

Simplicity- does the competitor have the skills necessary to imitate the advantage?

• Trialability - can prototyping or other expediting techniques be used to quickly trial their version of the advantage?

• Observability - how hard is it for the competition to understand the internals of the advantage?

Four Dimensions of Strategy Time - thinking across

time from perspective of the past, present & future

Substance - thinking about problems in terms of both concrete & abstract natures

Cardinality - multiple issues concurrently

Synthesis - analytical decomposition lies at the heart of strategic thinking

Strategic Thinking

• Strategists think about problems in terms of established & proven strategic ideas or themes

Strategic Paradox

• In our daily lives we use linear logic to solve problems

• Consists of using common sense, deductive/inductive reasoning & concern for economies of time, cost & overall effort required

• Strategic planning conversely is executed against a backdrop of hyper-conflict & intelligent counter-measures, it is and cannot be linear.

Summary Questions

• What are the five generic categories of advantage?

• Describe SCA (sustainable competitive advantage).

• SCAs have seven attributes, what are they?

• What are the 4 dimensions you must consider when developing your plan?

Strategic Thinking For IT- Part 2• IACT 901• Modules 3 and 4• University of Wollongong

• Penney McFarlane

Frameworks Are Used As Strategic Aids

• Methods developed & offered by academics, consultants & practitioners that capture some important strategic insights

• Packages strategic insights in a way that makes them useable by many

• The more substantive the framework, the easier it is to use, but shorter in applicability due to changing times & circumstances.

• The more abstract or generic, the harder it is to use, but it is of longer currency as it provides abstract ideas that are interpreted according to time & circumstances.

Dynamics of Change

Technological Substitution

•which one technology displaces another in performing a function or set of functions for a market

•Substitute technology offersinducement to switch by virtueof improved value proposition

Q. Can you think of an example oftechnological substitution?

Technological Diffusion

• Process by which a marketplace learns about a substitute technology

• Provides an understanding of the logic & speed of switching by customers

• By nature information technologies that are capital, infrastructure & skill intensive require time to diffuse.

Stages• At stage 1 the product will be

incomplete & expensive & only appealing to a niche market

• In stage 2 & 3 dramatic improvements are made. For every dollar invested in improvement there is a significant greater return in value proposition

• In stage 4 the limits of the technology are reached. It is increasingly difficult to squeeze out improvements

Speed of Diffusion Is a Function Of: • Value proposition - how superior is the value

proposition of the new to the old?• Infrastructure - how much infrastructure support

must be put in place to support the new technology?

• Learning - what communication channels are used to reach, persuade, influence the market?

• Ease of substitution - how much effort (time, cost, training etc) is required to adopt the new technology?

• Defense - how does the old technology defend itself & in doing so alter the comparative value proposition?

Life Cycle of Technology

• Life cycle of a technology routinely illustrated through the use of S curves

• Logic of S curves– All technologies should/must be

understood in terms of performance limits

• Price/performance of investments in technology will follow an S curve shape but flatten out as it eventually reaches its limit

Strategic Framework I

• Understanding S curves & interpreting events in terms of them is a crucial skill for all IT strategists

• S curve "when & if analysis" can be of great assistance in analysing the substitution of the internet for private networks ie. EC over the internet vs EDI using van's

Strategic Framework II- Scenarios• Provide a structured way to define

possible futures, understand causation chains leading to those futures & develop options & strategies to deal with the uncertainties– A causation chain is a time-ordered

set of events that moves you from a start state, the world today, to a plausible end state

• Also provide a structured context to stretch thinking about what might happen & prepare for the eventuality

• For desired futures the strategist can develop action to make them happen

• For undesirable futures actions to block them from unfolding can be developed

• When multiple futures share a common pivotal event the business can be positioned on that event to prepare to spring in multiple directions

Benefits of Scenario Approach

– Forces an external focus motivates to take a fresh and open view

– Stimulates deep, creative & insightful thinking. Resources of a team to imagine the future

– Broadens understanding of what drives IT

– Challenges & provokes community learning. Forces everyone to think outside 'the box'

• Prepares the business to recognise futures as they emerge

• Scenarios & S curve theory compliment each other

• Highly advantageous to mix techniques in strategic thinking

• When thinking about futures in terms of scenarios it opens planning to a number of options

– Can hedge bets & prepare for multiple futures

– Emphasise making reversible decisions

– Stagger initiatives & commitments

•Can keep resources in reserve•Choose actions that permit

meeting multiple futures •Maintain a state of hyper-

vigilance & watch for a winning

– The ability to position the business in any or all of these ways is highly compatible to mediating the necessity to take deliberate actions while coping with heightened uncertainties & risks of the times

Strategic Framework III- Core Competencies• Represents the collective learning of an

organisation • Emphasises especially hard to

coordinate diverse skills that integrate multiple streams of technologies

• Provides the roots of competitive advantage

• Can be leveraged to develop & support multiple products for varied markets

Defining Attributes

• Provide access to a wide variety of markets

• Make a significant contribution to customer's perceived benefits of the product

• Are difficult to imitate • Are sustainable

Defining Attributes

• Often represent the complex coordination of multiple heterogeneous technologies & applied skills

• Provide a highly leveraged environment by substituting competence for capital

• Core-competency driven organisational units maintain a portfolio of competencies that enable them to create/evolve a portfolio of products for a collection of markets

• Obvious impact of core competencies on IT is that you need to reflect carefully on what competencies are to be & how they should be defined

• Speculating on what set of core competencies should be is expedited by coordinating with other frameworks such as scenarios & S curves

Question

• Q. For each scenario future what core competencies will we need to master?

• Most interesting implication of core competencies is impact on staffing & competency definition.

• Many IT professionals have historically associated identities strongly with specific technologies.

• Incompatible with a fluid IT organisation.

• Important to define competencies in terms of generic skills.

– Of all things designed for flexibility & speed human resources are the most crucial

Framework IV - Dominant Logic• It is a pervasive & universally

accepted logic of how an industry works & how one competes in that industry

It does not usually have to be defended & actions contrary to the dominant logic are automatically held suspect

• Also referred to as the conventional wisdom of the times

• Provides structure to document historical, contemporary & projected dominant logic for an industry & associated logic of IT assets needed to support that logic

Reasoning of the Framework

– How is it generally agreed that you win in this industry today & how do you deploy IT assets to make it happen?

– How is it generally agreed that you won in this industry 5 years ago & how did you deploy IT assets to make it happen?

– How will you win in this industry 5 years from now & how will IT assets have to be deployed to make it happen?

– Technique integrates nicely with scenarios and S curves

– IT strategy BOTH impacts business strategy & enables it

– Problem for IT strategist is understanding how the business wants to win so that IT assets can be selected & deployed to both influence how they will win & enable winning to occur

– Dominant logic provides simple but highly enlightened framework to conceptualise this information, achieve consensus on how IT can be used to win & develop shared agenda on what needs to be done to make it happen

Framework V - Reach, Range & Manoeuvrability • IT-specific framework that suggests

that IT strategic decisions should be deliberated in terms of three fundamental & overarching vectors I. Reach

– IT architecture investment should focus on continually increasing the reach of the architecture

– Defines who can access information, from where, with what security, interfaces & in what mode

Reach

• Domain includes both within/outside the business

• Enables creating virtual organisational structures & bonding with value chain partners

Range cont

• IT architecture investment should focus on continually increasing the range of the architecture – Defines what forms & structures of

information can be accessed – Domain is both within/outside

business– Enables virtual business &

integration with value chain partners

Maneouverability

• IT architecture investment should focus on continually increasing the manoeuvrability of the architecture

• Defines the options available to alter the configurations of HW/SW

• Addresses portability, scalability, adherence to standards, reconfigurability & modularity

Question– Q. Given a finite

budget & set of user demands what combinations of moves that increase range, reach & manoeuvrability will yield the maximum utility to the business?

–The permanent quest of IT strategy is to achieve the unobtainable state of perfect reach, range & manoeuvrability

– It is the differences in the pursuit of that quest that makes the difference to IT advantage